RAIF’s

Introduction

The new legislation on Reserved Alternative Investment Funds (« RAIFs ») was adopted by the Luxembourg Parliament on 14 July 2016 (the « RAIF Law »). The RAIF Law offers more flexibility to investors, as the RAIF is not subject to any product approval by the CSSF, but is required under the provisions of the RAIF Law to a appoint an authorized AIFM. By adopting this new law, Luxembourg is about to revolutionize the international alternative investment sector by extending the existing range of structuring solutions for Private Equity. Real Estate, Hedge Funds and other AIF strategies. This innovation in the alternative investment industry strengthens the role of Luxembourg as global center of excellence for alternative investment funds.

This new type of investment vehicle will have similar characteristics to the already existing specialized investment fund (SIF). The major differences being that the RAIF is not subject to prior approval and supervision by the Luxembourg supervisory authority (“Commission de Surveillance du Secteur Financier, the CSSF”).

Drivers

Luxembourg is the leading jurisdiction in Europe for the structuring and setup of investment fund structures and is recognized as a center of excellence in the investment fund industry. The country has become the global leader for cross-border distribution of regulated investment vehicles and is the jurisdiction of choice for the structuring of alternative investment funds.

The primary driver for the RAIF Law was the strong demand from institutional and high net worth investors, along with their asset managers for faster time-to-market vehicle offering similar characteristics as the already existing SIF. The RAIF offers similar advantages while giving its managers enough flexibility in the choice of the investment strategies and eligible assets. Since the RAIF is not regulated by the CSSF, the Luxembourg regulator, investor protection is offered through the management of the RAIFs assets by a regulated Alternative Investment Fund Manager (“AIFM”).

Advantages

Due to the fact that the RAIF will not stand directly under the supervision of the CSSF, it offers more structuring flexibility than the SIF. Moreover, because only well-informed respectively qualified investors are able to invest, RAIFs benefit from less restrictive requirements. The RAIF is exempt from prior approval by the CSSF which offers an attractive time-to-market.

From an investment perspective the RAIF benefits from a broader range of eligible fund strategies and structuring possibilities, as there are no restrictions imposed by the CSSF. However, the RAIF will need to comply with all valuation, risk and portfolio management requirements set out in the AIFM Directive.